Buy-to-Let Mortgage Calculator

How it is calculated

Gross Yield = (Annual Rent ÷ Purchase Price) × 100; ICR = (Monthly Rent ÷ Monthly Mortgage Interest) × 100

Worked example: Buy-to-Let Terrace in Manchester at £200,000

£200,000 purchase price, 25% deposit (£50,000), borrowing £150,000 at 5.5% interest-only. Expected rent £1,100/mo, operating costs £150/mo.

1. Calculate monthly interest: £150,000 × 5.5% ÷ 12 = £687.50.
2. Calculate gross yield: (£1,100 × 12) ÷ £200,000 = 6.60%.
3. Check lender ICR: £1,100 ÷ £687.50 = 160% (comfortably exceeds the standard 145% threshold).
4. Compute net monthly cash flow: £1,100 − £687.50 − £150 = £262.50 per month.
5. Calculate net annual return: £262.50 × 12 = £3,150 net profit per year (net yield 1.58% on total value, or 6.30% return on invested cash equity).

Net monthly cash flow of £262.50 with a 6.60% gross yield and 160% ICR coverage.

How to Use This Calculator (Step-by-Step)

1. Enter the property purchase price and planned deposit (UK BTL mortgages generally require at least 25% deposit).
2. Input local comparable market rents achievable for the property.
3. Specify the BTL mortgage interest rate (most UK BTL mortgages are executed on an interest-only basis).
4. Deduct letting agent fees (typically 10-12% + VAT), landlord insurance, ground rent, service charges, and void maintenance buffers.
5. Verify that the Interest Cover Ratio (ICR) is at least 125% for standard rate taxpayers or 145% for higher rate taxpayers.

Frequently asked questions

What is the minimum deposit for a UK Buy-to-Let mortgage?

Most UK lenders require a minimum deposit of 25% (75% LTV), although specialist lenders may accept 20% at higher interest rates.

What ICR do UK mortgage lenders require?

Lenders typically require rental income to cover the mortgage interest by 125% for basic rate taxpayers or properties held in a Limited Company Special Purpose Vehicle (SPV), and 145% for higher-rate individual taxpayers, often stress-tested at 5.5% or higher.

Should I buy my BTL in my personal name or a limited company?

Many UK property investors now buy through a limited company (SPV) because company profits allow 100% deduction of finance costs before Corporation Tax, bypassing Section 24 restrictions.

What is the difference between gross yield and net yield?

Gross yield ignores costs: annual rent divided by purchase price, which is 6.60% in the worked example. Net return deducts monthly mortgage interest and operating costs first, giving 262.50 pounds a month, or 3,150 pounds a year, in that same example.

Should I budget for empty periods?

Yes. Budgeting for zero vacancy or zero boiler breakdowns inevitably leads to cash flow deficits, so the monthly costs input should include a buffer for voids, repairs, management, and insurance rather than rent alone.

How does Section 24 affect individual landlords?

Individual UK landlords can no longer deduct mortgage interest from rental profits before income tax. Instead, a basic-rate 20% tax credit applies, which can push landlords into higher tax brackets, so the pre-tax cash flow shown here is not the after-tax result.